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Wednesday, 21 March 2012

USPTO Director David Kappos has a blog post on his Director's Forum entitled "Comparing USPTO's New Post-Grant Processes and Associated Costs to EPO's". The title promises a little more than it delivers, as there's no actual comparison between the fees charged by the EPO for filing an opposition, and those which the USPTO is proposing to charge for the new post-grant review under the America Invents Act (AIA).

Follow me, Merpel. There is villainy afoot.

The IPKat, failing to see any figures mentioned, wondered what sort of villainy was afoot. Was the USPTO proposing an amount of double the EPO fee? Surely not three times as much? The blog post gave no clue other than coyly admitting that the US fees would be "substantially higher" than in the EPO. The IPKat went hunting for a copy of the proposed USPTO fees.

It turns out the EPO opposition fee of €705 is something of a bargain. The USPTO is going to charge an official fee of $27,200 for challenging a patent after grant -- and that's assuming you're only challenging the first 20 claims. Presumably it would be prudent to budget also for (ahem) substantial attorney fees on top of this official fee outlay.

$27k is a minimum amount. The official fees are on a sliding scale, and depend on the number of claims being challenged (rather than the number of claims in the patent). If you are unlucky enough to need to challenge 60 claims it will cost an eye-watering $68k in official fees. The fees can be seen at page 6 of this PDF, about half-way down the page.

It's going to be a while before anyone has to pay these fees. As the IPKat understands the implementation timetable, it is only patents granted on applications filed after March 16, 2013 which will be open to challenge according to this post-grant review procedure.

What's the rationale behind charging so much, and is it fair to compare the USPTO's $27k fee with the EPO's sub-thousand dollar opposition? These are the issues which Director Kappos addresses in his post, where he says:

While the new U.S. post-grant processes and the existing EPO opposition procedure are each “post-grant processes,” there are a number of important, fundamental differences. And these differences, in turn, drive major differences in cost.

He diplomatically sidesteps any discussion of whether the US system is better or worse than the EPO's: they're just different. He likens the EPO system as "akin to a post-grant examination" whereas the US system will be litigious in its nature.

Specifically, EPO oppositions are conducted by specially appointed examiners; do not allow for discovery; and no estoppel is imposed after an unsuccessful challenge. In contrast, U.S. AIA post-grant processes will be conducted by patent judges, who will officiate over processes with substantial discovery, with estoppels to be imposed upon final written decisions. (Merpel says the official fees are likely to be minor compared to the attorney fees when there's "substantial discovery" and more than a hint of intensive and very expensive courtroom proceedings. For litigation partners who are wondering what to buy with the inevitable windfall, Merpel suggests a spanking new hundred-footer with all mod cons moored somewhere on the West coast, and a decommissioned 1960s America's Cup racer for cruising from the East coast to the Caribbean? She is always glad to help with life's little dilemmas.)

Director Kappos then makes the additional point that EPO opposition and appeal proceedings generally drag on for between 4 and 6 years before a final decision, whereas the AIA dictates that proceedings are completed with a final decision within a year, or 18 months in exceptional cases. Very different processes, he points out, lead to very different cost structures, and the USPTO's procedures will cost much more to run. (True, but couldn't they be designed differently so that they would cost less?)

Finally, he gets to the nub of the issue, which is that fee setting in each case is driven by different policy objectives. In particular, Congress has mandated that the USPTO recover the costs of conducting post-grant reviews, while EPO opponents do not pay anything near the full cost of the proceedings they instigate. He says:

While EPO oppositions are subsidized, the proposed U.S. fees reflect a cost-recovery model charged directly to the requestor, without utilizing subsidies paid by patent applicants or other service requestors. This is no accident -- it is intended to implement the statutory language stating that post-grant process fees will be established with reference to the cost of conducting the processes. Congress chose to use this language uniquely for the post-grant provisions of AIA. While it does not on its face require us to charge at a strict cost-recovery level, clearly it was meant to guide USPTO in determining where to set our applicable fees.

But wait a second ... if the EPO opponent is being "subsidized", as Director Kappos puts it, who's paying those subsidies? It has to be the applicants and patentees who fund the EPO. Now that's a raw deal for an EP patentee: you pay significant amounts, including hefty annual fees, to have your patent granted and keep it in force. But each time you send the EPO a euro, a few cents get put aside for your competitors should they choose to attack the very patent which cost you so much to obtain.

Anyway, this explains the high costs. From judges' salaries to paper clips, it all has to be paid for by the opponent. Director Kappos

The IPKat wonders whether "substantial discovery" is really justified in the majority of cases. One or other party will always want to find a reason to get discovery, depose inventors, call witnesses and generally blow the proceedings into as big and expensive a courtroom battle as possible. The EPO's opposition may be "akin to a post-grant examination" but for the majority of oppositions based on published prior art, the quality of the decision-making holds up pretty well without the paraphernalia of a courtroom trial. Surely you don't need discovery and cross-examination every time someone alleges that a straightforward combination of two prior art references should be combined to render claim 1 obvious.

This Kat concedes however that the EPO opposition regime is less suited to issues which turn on non-documentary evidence, witness statements, prior use and so on. In such cases, a more adversarial system would have greater rigour and would better test the evidence relied on, and good patents are sometimes revoked by the EPO based on evidence that would not stand scrutiny in an adversarial system.

If you're a US patent applicant, it seems like enormously large claim sets are the way to go. They provide a huge disincentive to potential opponents who might need to challenge the patent under this procedure. The claims can be hugely repetitive, indeed it may be preferable that they are overlapping and mutually redundant - if someone infringes a dozen dependent claims, all being minor variations on the same theme, then that's going to cost them dearly.

Financially, there's a major imbalance between the cost of getting an extra claim and the cost for an opponent to get rid of it. For example, each dependent claim (after the first 20) is going to cost $100. So the extra cost of an application with 100 claims vs 20 claims will be a piffling $8k. Now, suppose an infringer or opponent needs to challenge all 100 claims? That will cost them a magnificent, staggering $176,800 in official fees.

3 comments:

The Maths Kitty
said...

Dear David,

I am wondering about the cost you mentioned in your article. According to the table of patent fees, the amount for post grant review fees (page 3) is from $ 38.800 to $ 125,300.I believe the cost you mentioned are related to the inter partes review, which has a different scope for challenging a patent.If I am not mistaken, the difference between the EPO opposition system and the PGR system is then even bigger than €705 to $ 27.200, which still remains huge.

So let me get this right, the USPTO thinks that when Congress said in s. 30 AIA

"SEC. 30. SENSE OF CONGRESS.It is the sense of Congress that the patent system shouldpromote industries to continue to develop new technologies thatspur growth and create jobs across the country which includesprotecting the rights of small businesses and inventors from predatory behavior that could result in the cutting off of innovation."

They meant that the minimum fee for inter partes review [$27,200] and the minimum fee for post grant review [$35,800] should be 3 to 4 times higher than the fee for inter partes reexamination [$8,800] that they replace.

Inter partes examination appears not to be cost covering but the new systems are supposed to be cost covering.

It is not immediately apparent why increasing the cost of challenging patents will promote innovation, although it is easy to see that predatory behaviour [keeping and asserting invalid patents] will be promoted.

This looks like an own goal, especially as it is difficult to see how the USPTO will meet the challenging time limits with a full blown litigation procedure.

The AIA does not say that fees should be cost-covering it says that "The Director shall establish, by regulation, fees to be paid bythe person requesting the review, in such amounts as the Directordetermines to be reasonable, considering the aggregate costs ofthe review." In other words, the level of fees should have some relationship to the aggregate costs, but that is not the same as saying they should be cost covering.

Section 10 AIA states that "Fees may be set or adjusted under paragraph (1) only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents (in the case of patent fees) and trademarks (in the case of trademark fees), including administrative costs of the Office with respect to such patent or trademark fees (as the case may be)".

Again, "aggregate" language is used. If there was a requirement for individual fees to be cost covering and only reflect the cost of the particular service the 11.5 year annuity fee [proposed to be increased from $4730 to $7600] appears to be banditry of the worst order given that the unit cost is given as $1.

No, the fee proposals appear not intended to support Congress's intent but to thwart it.

"Now that's a raw deal for an EP patentee: you pay significant amounts, including hefty annual fees, to have your patent granted and keep it in force. But each time you send the EPO a euro, a few cents get put aside for your competitors should they choose to attack the very patent which cost you so much to obtain. "

I don't see anything wrong with that. Today my patent may be opposed, tomorrow I might be the opponent. And why should only rich opponents have their way ?Besides, the amount of the annual renewal fees is not decided by the EPO but by the member states.

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